India’s inflation rate nudges 12 percent mark

New Delhi, July 31 (IANS) India’s annual rate of inflation inched closer to the 12-percent mark at 11.98 percent for the week ended July 19 to reach the highest level in nearly 14 years. The annual rate of inflation, based on wholesale price index, was 11.89 percent for the week before.

The data on wholesale prices released by the commerce and industry ministry Thursday showed an increase of 0.1 percent in the price of primary articles, including food articles for the week under review.

The index for manufactured products rose 0.2 percent due to higher prices of oilcakes and sugar, while the index for textile group rose by 0.9 percent and that for machinery and machine tools was up 0.1 percent.

Alarmingly, the final index for the week ended May 24 showed that the annual inflation rate actually stood at 8.9 percent, compared to 8.24 percent reported earlier, based on provisional statistics.

“Inflation, on a week-on-week basis, has continued to remain stable,” the finance ministry said in statement, soon after the wholesale price data was released here. “The wholesale price index moved up only marginally.”

The latest data has not taken into account the anti-inflationary measures that were announced by the Reserve Bank of India (RBI) Tuesday, which saw a key interest rate being hiked by as much as 50 basis points.

The central bank had also revised upward the cash reserve ratio - the minimum cash commercial banks have to retain against deposits - by 25 basis points in a bid to curb liquidity in the system and tame inflation.

Prime Minister Manmohan Singh has already announced that bringing down prices - which hits the average citizen the most - would be the top priority for the United Progressive Alliance (UPA) government.

In fact, the Reserve Bank has said that it intends to bring down the inflation rate to 7 percent by the end of this fiscal, but also made it clear that it only expected prices to ease from the second half of the third quarter.

“At this juncture, a realistic policy endeavour would be to bring down inflation from the current level of about 11-12 percent to a level close to 7 percent by March 31, 2009,” Reserve Bank of India Governor Y.V. Reddy said.

“It is expected that inflation would moderate from the current high levels in the months to come and noticeable decline in inflation can be expected towards the last quarter of 2008-09,” he said.